Archive - Jan 2015

Funding Markets just called The FOMC's bluff. Policymakers are acting out rational expectations theory or at least how they see it. In other words, their job is not to analyze actual economic conditions, but to condition economic thought toward the end goal. If they convince you that they believe the economy is on track they further believe you will act accordingly (“you” being both investor and economic agent). The more the economy diverges from the “preferred” projection, the more emphatic the cries of “recovery” become. At some point, desperation becomes palpable.

Whatever it takes!

According to the NY Fed, 177 tons of gold have been withdawn from its vault in 2014; according to foreign central banks, at least 207 tons of gold were withdrawn from the NY Fed in 2014.

Did a Fed intern make a very glaring math error or is something else going on?

"According to the American Academy of Family Physicians, around 10 percent of family doctors already offer shared medical appointments, sessions that bring together a dozen or more patients with similar medical conditions to meet with a doctor for 90 minutes. With pressure from the government and insurers to bring down the cost of care while treating the increasing number of people with health insurance, patients can expect group visits to become more common. “It’s efficient. It’s economical.""

The Czechoslovakia crisis of 1938 marked a pivotal shift in the balance of power in Central Europe, putting the major world superpowers in a collision course. The policies of one superpower in particular made inevitable what was to come less than a year later - World War II. This episode provides important historical insights on geopolitics, appeasement strategies, buffer zones, ethnic tensions – and unintended consequences.

Simple near-term outlook.

We are witnesses to an epic failure of planning, statecraft and social justice. Regardless of where your politics be, these elements are critical for a modern globally connected economy to function.

Sadly, the geopolitical backdrop is one of suspicion and hostility in the form of a festering proxy war between western and Russian interests in Ukraine and regional crisis and humanitarian catastrophe in the middle east as Syria and Iraq descend into stateless anarchy. These factors reduce the odds of a successful solution in Greece being found in time.

With NIRP raging in the Eurozone and over €1.5 trillion in European government bonds trading with negative yields, many were wondering when any of this perverted bond generosity will spill over to other debtors, not just Europe's insolvent governments (who can only print negative interest debt because of the ECB's backstop that it will buy any piece of garbage for sale in the doomed monetary union). In fact just earlier today we, rhetorically, asked a logical - in as much as nothing is logical in the new normal - question: "Who will offer the first negative rate mortgage." Little did we know that just minutes after our tweet, we would learn that at least one place is already paying homeowners to take out a mortgage. That's right - the negative rate mortgage is now a reality.

When Eric Holder announced his resignation, many breathed a sigh of relief thinking it can’t get much worse, but not so fast. The authoritarian streak and rampant cronyism of the Obama administration is a well oiled machine. You didn’t think you’d get off that easily did you? Enter Loretta Lynch.

"Reality" is not "perception"

If readers need clarification on what was the primary source of spending-based "growth" for the US economy in the fourth quarter, the same source that bumped up final Q3 GDP from 3.9% to 5.0%, please ping us: we will gladly explain the chart below.  And just in case it is still unclear what Americans are spending their "gas sasvings" on, here it is one more time.

"It may work out just fine, but there’s a risk to that strategy... we’re in some sense distorting what might be the normal market outcomes at some point, we’re going to have to stop doing it. At some point the pressure is going to be too great. The market forces are going to overwhelm us. We’re not going to be able to hold the line anymore. And then you get that rapid snapback in premiums as the market realizes that central banks can’t do this forever. And that’s going to cause volatility and disruption." - Charles Plosser

The Tulip Lunacy in the Bond market is just off the charts stupidity at its finest!  The U.S. 2-Year Bond is currently pricing in no rate hike, and in fact, a negative rate of inflation over the next two years.... 

According to IRS estimates, there’s close to $5 trillion in individual retirement accounts in the Land of the Free. This is money that taxpayers prudently set aside for retirement, hopefully cognizant that Social Security isn’t going to be there for them. Devoid of any other easy lender, $5 trillion is far too irresistible for such a heavily indebted government to ignore. We've long warned that the government could easily nationalize a portion of all IRAs. It started happening last year with MyRA followed by the President and Treasury Secretary embarked on a blitzkrieg-style marketing campaign to pump the program... and now comes Step three..

Meet Numbeo, the world’s largest database of user contributed data about cities and countries. This infographic uses this information to show the most expensive and cheapest places to live by country. Switzerland and Norway may not surprise you as two of the most expensive countries. However, Venezuela might not have been a place that was on your radar. Of course, in retrospect, when you have inflation spiraling out of control at a rate of 64% per year, that will make things a bit pricey. Want cheap goods and services? Head over to India, Nepal, and Pakistan.